Based on what I’ve observed over the past eleven years, its days like today when my job is most important. Many topics to discuss – including both big picture issues and the day’s farcical “trading” action. We’ll start with the latter; as I’m sure it’s on most of your minds.
Let’s face it, the Cartel has declared WAR on the Precious Metals; an all-out offensive, I might add, attempted countless times throughout history, but ALWAYS ending in failure. They may think this time is different because the (currently shut down) CFTC is in their pocket; the anti-PM PROPAGANDA machine is turned up full tilt; and an assortment of technologically advanced naked shorting tools sit at their disposal. However, all the PAPER PMs in the world don’t add up to a single ounce of real, PHYSICAL metal; and given this year’s maniacal price suppression – to levels WELL BELOW the respective costs of production – it’s just a matter of time before the 15%-25% production decline I am forecasting comes to pass. To wit, the world’s largest silver miner announced a 17% year-over-year decline in the first half of the year; and this was before the full effect of the price smash was recognized. Heck, Coeur D’Alene – the world’s ninth largest silver producer – this morning announced a 10% sequential production decline; which I ASSURE you, is just the tip of the iceberg for the global silver mining industry.
Meanwhile, there’s that little old thing called fundamentals that even the most powerful, market manipulating Cartel can’t control. History’s most insane, worldwide money printing experiment hasn’t produced an iota of real economic recovery; which is why ALL major Central banks keep printing, while global unemployment remains at or near historic highs. At such depressed prices, PMs don’t need weak economies to catalyze buying. However, that’s EXACTLY what they’re getting; and will, in spades in the coming years – as Central bank PRINTING PRESSES continue to fuel inflation; while “big government” cannibalizes real business; and inexorable population growth tightens demand for REAL ITEMS OF VALUE. Meanwhile, the “all’s well” PROPAGANDA machine continues to spout relentless LIES about “recovery”; which frankly, even a reasonably intelligent fifth grader can see through by now…
I mean geez; the people are practically SHOUTING it. To wit, we’ve all heard the term “it’s the economy, stupid”; and when it comes to government approval ratings, ONLY the economy determines how people opine (albeit NOT when it comes to actually voting, when whichever candidate promises the most entitlements wins). Per below, not only is government approval at an ALL-TIME LOW, but by a wide margin…
Today’s “economy” is governed entirely by the flow of credit from the Federal Reserve – either altering or subsuming nearly all legitimate, free market business practices. Throw in draconian government regulations like Obamacare – not to mention, the fact the government is by far the nation’s largest employer – and you have an economy that long ago left “capitalism” in the dust, en route to its supposed arch-nemesis of communism.
Case in point, the “banking” sector; which no longer “banks” much of anything. These INSOLVENT, vulture institutions have been taken under the governments wings – permanently. Thus, they no longer lendto the public; but instead, simply take free ZIRP and “QE” funds to speculate with and pay bonuses. Their losses are 100% covered by the government, and “profits” emanate principally from the FASB’s 2009 ruling that banks can value toxic assets at whatever fantasy prices they choose.
This quarter, the ENTIRE ECONOMY has seen a freefall in earnings expectations; in fact, one of the steepest declines EVER, particularly when measured not by ambiguous, statistically insignificant “diffusion indices,” but HARD DATA. Gee, I wonder if this economic disaster has anything to do with the 10-year Treasury yield – as a proxy for the yield curve – rising from a Fed-suppressed RECORD LOW of 1.5%, to a whopping 2.9%. And to that end; gee, I wonder if the Fed – under the chairmanship of “uber-dove” Janet Yellen – will consider “tapering,” given it is right now the ONLY real Treasury buyer. As for the “banking” sector, early earnings reports have been abysmal, as the tiny rate increase has hammered core operations. The mortgage business has been decimated; and as I discussed last week, the Wall Street hiring atmosphere is being compared to the last hours of the Titanic.
Of course, thanks to the aforementioned FASB-sanctioned accounting gimmickry, both JP Morgan and Wells Fargo “beat expectations” this morning. Except in JP Morgan’s case, core operations actually posted a LOSS; while Wells Fargo’s net interest margin plummeted. In other words, both banks will need more FREE ZIRP and QE money than ever, as actual operations hemorrhaged cash. Thus, do you now understand why yesterday afternoon – just after the 10-year yield rocketed above 2.7%, it was suddenly “rescued” by “blistering demand” at the 30-year T-Bond auction? Or, for that matter, why in ultra-thin “pre-market” trading at 6:00 AM EST this morning, Treasury yields turned on a dime for no reason – suddenly turning big losses into big gains? No, there was no “news” about the government shutdown/debt ceiling talks; or for that matter, ANYTHING. Just a plain old Fed “turbo-QEing” to keep rates from rising…
As the morning progressed, NOTHING incrementally newsworthy emerged; that is, until 10:00 AM EST, when consumer confidence plunged to its lowest level of the past year; including an utterly shocking collapse in the all-important 12-month economic outlook…
“Tapering,” anyone? You know, the supposed reason PMs have been plunging all year? Not if you listen to the just out comments from permanentFOMC voting member Jeremy Powell; or, for that matter, anyone with a brain…
Irrespective, by then, the day’s main event had long passed. Topping off a week of infamy in the CFTC-less PAPER markets, we experienced the second CME shutdown in the past month; in both cases, due to MASSIVE, MANIPULATIVE PM sell orders. Setting up the landscape, let’s go back to yesterday morning at EXACTLY 8:40 AM EST; when a GARGANTUAN “market sell” order of 600,000 ounces of gold – valued at $786 million – suddenly swamped the COMEX, just 20 minutes after it opened. The day’s budding gains were immediately erased, and five minutes later the KEY ROUND NUMBER of $1,300 was breached to the downside. No news, no outside market movements, no NOTHING. Simply the government attacking the PAPER price to affect sentiment; and if you don’t think such “corruption” is possible, you’d have to be blind. Market rigging has literally become a daily occurrence in recent years; such as today’sallegations of massive, widespread currency manipulation. I won’t even comment on what they did at 3:00 PM EST, as I already did yesterday.
Fast forward to this morning, when again at EXACTLY 8:40 AM; again, with ZERO news other than the poor JPM and WFC earnings, and less progress in the government shutdown/debt ceiling talks than expected – a whopping TWO MILLION OUNCE “market sell” order hit the COMEX, valued at a ridiculous $2.6 BILLION. The WATERFALL DECLINE charts below tell the story; as does the fact that for the second time in the past month, the CME actually shut downthe PM pits for nearly a half-minute due to “lack of liquidity.” In other words – like yesterday, this MONSTROUS order was put in solely for the purpose of knocking the price down; with absolutely ZERO fear of the regulators. Gee, I wonder who could possibly fund, and get away with, such acts…
I had originally planned a deeper discussion for this morning’s article. However, as noted earlier, the day’s events rendered that impossible. That said, quite a bit of important information was imparted on this morning of “PM infamy.” I won’t hesitate to use another page on a topic near and dear to my heart; i.e., the supposed U.S. Treasury gold reserves of 8,133 tonnes; which, despite sounding like an imposing amount, would be worth just $330 billion if they even existed.
Putting this piddling amount into context, $330 billion could only fund government spending for a single month, or pay off a measly 1.9% of the national debt. Actually, if you include “off balance sheet” debt, only 1.5% could be paid off; and if “unfunded liabilities” are counted as well, just 0.1%! FYI, the fact this gold has likely been covertly leased, swapped, or sold is immaterial for purposes of this discussion; and if you don’t believe me, just ask the Germans – who were told they have to wait SEVEN YEARS for the return of just 300 tonnes.
Anyhow, my point relates to an article published yesterday by Marketwatch reporter Brett Arends. In it, he discusses his discourse with a U.S. Treasury spokesperson, after asking why it doesn’t just sell its gold to help fund the deficit; or at the least, the bankruptcy costs of the White House gift shop. And their answer…
Selling gold would undercut confidence in the U.S. both here and abroad, and be destabilizing to the world financial system.
-Resource Investor, October 10, 2013
So let me get this straight. According to the Treasury itself, the value of its (supposed) gold is worth more than the nation’s very credibility. That is, it would rather default on its debt – as will occur next week without a “debt ceiling deal” – than sell a measly $330 billion worth of gold. I mean, I thought gold was a “barbarous relic”; although you wouldn’t know it from the actions of other Central banks, who have been net buyers for the past five years.
In my view, this incredible statement from the horse’s mouth should scream LOUD and CLEAR what governments truly believe about gold; not to mention, why they fear its uncontrolled rise. If a tiny stash is considered enough to “undercut confidence in the U.S. and destabilize the world financial system,” just think of what the realization it no longer exists might catalyze. Let alone, if gold surged against the U.S. dollar and other major fiat currencies; which, come to think of it, has been occurring for the past 13 years…
Again, only you can determine if the information imparted on the Miles Franklin Blog rings true – not to mention, those of the world’s other “good, smart people.” If you believe so, WHAT ON EARTH are you waiting for to prepare for what’s coming? Just as has occurred hundreds of times throughout history, the fraudulent fiat currencies will collapse spectacularly – leaving only REAL MONEY in their wake.
